Deferred Income Annuity With Inflation Protection

For example the single premium immediate annuity spia or deferred income annuity are very attractive vehicles from the standpoint of guaranteeing a certain level of income but the income will not increase if inflation rises since it is fixed at the time the income commences.

Deferred income annuity with inflation protection. Inflation protected annuities are less common than fixed annuities and also more expensive but they offer an interesting way to guarantee a stream of income for life that is protected against the. Inflation protected annuities are designed to help mitigate both inflation and longevity risks to a retiree s income says justin fort a certified financial planner and president of fort wealth. Real income generated by the cola spia will vary with inflation and both inflation and investment performance will impact real withdrawals for the va and fia. The inflation indexed spia has the unique property that real inflation adjusted income will remain level regardless of inflation.

The primary types of annuities that utilize colas are single premium immediate annuities spias and deferred income annuities dias. First the owner has 20 years during the funding period to address inflation. But the fidelity annuity simply doesn t do this. Deferred annuities come in many.

The answer is that it depends on the type of annuity. Deferred income annuities dias are continuing to grow in popularity because they are a personal pension plan with you determining when the payments start. Pfau concludes that a portfolio utilizing the 4 rule has a high probability to fail but through changing the bond portion to a fixed index annuity and a 30 year inflation income rider of 4 there s a high chance of success. 100 principal protected income.

The inflation risk to the fixed income annuity stream is protected in two ways. Interest rates play a secondary pricing role. In its accumulation phase you get a form of inflation protection by being able to invest in the market. This paper s findings suggest that fixed index annuities fias produce the best outcomes in terms of ongoing income and longevity protection for current and future retirees.